Mortgage Brokers or Banks: Which is Right for You

Applying for a mortgage loan for real estate has historically been a simple process. You simply went to the bank where you have checking and savings accounts and applied. As the years have passed, this approach has gone by the wayside do to the use of mortgage brokers. In fact, mortgage brokers now write more than half of the total dollar amount issued as mortgages in the country. When considering mortgage brokers or banks, the question is which is right for you?

When most people think about applying for a mortgage, they immediately think of their bank. The problem with this approach, of course, is banks rarely offer the best rates to their customers. If you come in and apply, the bank assumes you have not shopped for the best rates and are simply looking for convenience. This can result in your paying an extra quarter to half point in interest. While that may not sound like much, it adds up to tens or hundreds of thousands of dollars paid over the life of the loan.

Mortgage brokers are like travel agents in many ways. Instead of just looking for flights with one airline, mortgage brokers look for the best deals across a wide variety of lenders. In short, we are talking about the value of competition. Lenders offer a wide variety of interest rates, points and so on. With mortgage brokers, you are able to find the best option so you will have enough money to still head over to the travel agent to book a flight!

One area where mortgage brokers are a much better option than banks is loans for individuals with less than perfect credit. In this case, most of us. Banks tend to want to write "A" paper, which means issuing loans to people with excellent credit. Mortgage brokers, on the other hand, shop a wide variety of lenders that write loans for excellent credit, average credit and really bad credit. Even if you have horrible credit, a mortgage broker can often find you a loan. You can expect to pay higher interest rates, but at least you are in the home.

As for cost, there really is no difference between mortgage brokers or banks. With a bank, you are going to pay a wide variety of annoying fees such as application costs, appraisal fees, credit check fee and so on. You will pay the same with mortgage brokers. As for the fee to help you, mortgage brokers are actually paid by the lender only when a loan is closed. As you might imagine, this makes them highly motivated to get you financing.

When it comes to mortgage brokers or banks, which is right for you? Mortgage brokers almost always offer a better deal.